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I'm working through the Quantitative Equity Portfolio Management book by Chincarini and Kim.

I'd like to build a basic industry-based fundamental factor model. As this is a pet project for pedagogical purposes, I don't have the money to spend on Barra's GICS classifications. I also understand that other industry classifications (SIC and NAICS) are fairly useless for factor models.

Is there a reasonable open-source or homemade alternative (using, say, k-means clustering or non-negative matrix factorization) to create my own industry factors for US equities?

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If you can use clustering or PCA to determine your own factors, then you'd have a risk model, which in my opinion is far more useful than any industry classification. – chrisaycock Apr 22 '13 at 17:21
Even if I use PCA to generate an accurate risk model, won't there be times where I want a more easily interpreted model (see this Q&A when doing performance reporting, for example)? – MikeRand Apr 23 '13 at 10:43

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